How are bones & armatures connected to the rest of a model?
OOOkay.This is 

Armature in a Nutshell

Armatures and bones are for posing stuff, just like you would wiggle your arms and nod your head. All of your bones move whenever you move.
Same thing for blender bones, they help stuff move and get into different poses, like statues. (okay I'm gonna stop the five-year-old thing now)

All you have to do is make an armature that looks kinda like the shape of a skeleton.
See the stuff highlighted in orange? That's his skeleton. each one of those tetrahedron shapes is a bone.



you can make an armature like this by going into Edit Mode and extruding the bones by pressing E. When you do this you want to make it the shape of your model. See how it all is the shape of the robot-guy-thing? It's actually inside him, i just turned on an option called X-Ray so I could see it.

Build your armature until you think it looks good enough to be the moving skeleton of your model.Once this is completed, parent the object to the selected bones using Ctrl+P > With automatic weights.

This'll make the armature move the model when it moves. To try this, switch to Pose Mode and right click on a bone you wan to move. Press R to move a bone around, watch your model follow.

This was a very basic explanation and i'm kinda gritting my teeth right now not to write a novel on it but you'll find a lot more stuff as you get better with Blender.
If you want to see some of it, and it's pretty complicated, just search IK on this site. Your brain will go boom.

Sorry if I went to long.